MASTER'S DEGREE THESIS MODERN TRENDS IN LENDING TO

Ministry of Science and Higher education of the Russian Federation

Federal State Autonomous Educational Institution of Higher Education

“Siberian Federal University”

School of Economics, Management and Environmental Studies Basic Department of Sberbank of Russia

Confirmed by the Head of the Basic Department

of Sberbank of Russia _____________ Irina A. Yankina

Date _______ __________ 2019

MASTER'S DEGREE THESIS MODERN TRENDS IN LENDING TO AGRICULTURAL

ENTERPRISES OF THE KRASNOYARSK KRAY (ON THE EXAMPLE OF PC «ROSSELKHOZBANK»)

38.04.08 Finance and Credit Academic Course Code and Title

38.09.08.02 Banking

Master's Degree Program Code and Title

Academic supervisor _________ doctor of economic I.V. Tonkoshkurov signature, date sciences name, surname

position, degree

Graduating student ___________ _______________ E.M. Ondar signature date Name, surname

Reviewer ___________ Head of Department for work T.Y. Snitskaya signature, date with clients of large business name, surname

position, degree

Krasnoyarsk, 2019

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2

CONTENT

Introduction…………………………………………………………………..............3

1 The theoretical basis of lending to agricultural enterprises...................................... 7

1.1 The essence and concept of lending to agricultural enterprises..................7

1.2 Features of agricultural lending.......………………. . ……………………15

1.3 Russian and foreign practice of lending to agricultural enterprises............20

2 Analysis of the current state of lending to agricultural enterprises in the

Krasnoyarsk Territory.................................................................................................35

2.1 Trends in the development of lending to agricultural enterprises.............. 35

2.2 Assessment of the activities of PC “Rosselkhozbank” and its role in lending

to agricultural enterprises........................................................................................... 42

3 Prospects for the development of loans to agricultural enterprises......................... 49

3.1 Improvement of bank lending to the agricultural sector.............................49

3.2 Calculation of the evaluation of the effectiveness of the proposed

measures......................................................................................................................54

Conclusion.................................................................................................................. 64

Bibliography............................................................................................................... 69

3

INTRODUCTION

The decline in the efficiency of agricultural production in the initial period of

reforms was largely the result of unfavorable socio-economic conditions for the

functioning of economic entities. Among the main reasons for the current situation,

there is a lack of financing for agricultural enterprises, including the fact that lending

to the industry does not take into account the particularities of their current financial

and economic condition.

Historical Russian practice and international experience indicate that the

finances of agricultural organizations are distinguished by a certain specificity and

need a constant inflow of borrowed capital. Due to the duration of the production

cycle, seasonality of production and the associated nature of the formation of costs

and stocks in agricultural organizations there are no sources for continuous

funding. The use of borrowed capital allows you to significantly expand the volume

of economic activities of the organization, to ensure a more efficient use of its own

funds, to accelerate the renewal of fixed assets, etc. In this regard, the attraction and

use of borrowed financial resources is the most important aspect of the organization’s

financial activities aimed at achieving high business outcomes.

Today, it is difficult for agricultural commodity producers to get a loan from

commercial banks, since they are aimed at working with such borrowers who are able

to provide a high percentage of credit resources for a short period of time.

The relevance of the research topic is determined by the need to improve

agricultural lending. Currently, the need for credit resources in agriculture

necessitates the development of a specialized system that meets the requirements and

conditions of a modern market economy.

The issues of forming and developing a credit system in agriculture are

considered in the economic theory and practice of Russia and developed countries in

connection with their particular importance in the development of the infrastructure

of modern credit relations, forms and methods of lending. The sphere of agricultural

crediting is in its infancy due to the imperfection of legislative support, the

4

underdevelopment of the credit products market, and the absence of a number of

market infrastructure entities.

The solution of this group of problems will contribute to expanding the

availability of agricultural producers to credit resources, as well as ensuring

stabilization and development of the industry.

The state of knowledge of the problem. The fundamentals of the development

of agricultural crediting were investigated in the works as domestic scientists:

N.V. Antonova, G.N. Beloglazova, V.G. Zakshevsky, G.P. Zvereva, Z.A. Krush,

V.V.Kuznetsova, O.I. Lavrushina, M.L. Lishansky, I.B. Maslova, V.V. Morachevsky,

P.M. Pershukevich, E.V. Serova, L.I. Cold, R.R. Yunyaeva, R.G. Yanbyh and others,

both foreign: D.V. Adams, B.J. McDonald, G. Pederson, C. Peeples, G.L. Pipreka,

JDvon Pischke, L.Ya. Yarona and others

At the same time, they continue to be highly debatable, and therefore require

their theoretical reflection and clarification of the main directions for the

development of credit in agriculture. Despite the considerable study of the indicated

problem, it is necessary to deepen and develop the issues of improving state

regulation of agricultural producers' lending, assessing the impact of lending on the

characteristics and conditions of production in the agrarian sector of the economy.

Thus, the search for new approaches to the development of credit in agriculture

is relevant, which led to the choice of the topic, goals and objectives of dissertation

work.

The purpose and objectives of the study. The aim of the study is to develop the

theoretical and methodological provisions for the development of credit for

agricultural enterprises.

Achieving the goal of the study necessitated the following tasks:

- to study the theoretical foundations of the essence and concepts of lending to

agricultural enterprises;

- identify the features of lending to agricultural enterprises;

- identify the extent of the impact of credit on the development of the

agricultural economy;

5

- to justify promising ways of state regulation of crediting agricultural

producers;

- to analyze the state and development of lending to agricultural enterprises in

the Krasnoyarsk Territory;

- to assess the activities of JSC "Rosselkhozbank" in the field of lending to


- to develop the main directions of improvement of crediting of agricultural

enterprises.

Subject and object of study. The subject of research is the activities of a

commercial bank in the field of agricultural lending.

The object of the research is JSC "Rosselkhozbank".

Theoretical and methodological basis of the study. The theoretical basis of the

study was the fundamental provisions and concepts of economic theory, the works of

domestic and foreign scientists on the problem under consideration, legislative and

regulatory acts of the Russian Federation, software development of state authorities

and management of the agro-industrial complex, institutes of the Russian Academy

of Sciences on the development of the domestic agrarian economy.

We used the methods of system analysis, structural-logical, monographic,

economic-mathematical modeling, economic statistics and others.

The information and empirical base of the study was made up of official data

of the Federal State Statistics Service and the territorial body of the Federal State

Statistics Service for the Krasnoyarsk Territory, the Ministry of Agriculture of the

Russian Federation, the financial and economic reporting of agricultural

organizations, materials of industry scientific conferences, periodicals, the annual

report of Rosselkhozbank, The author's own development.

The scientific novelty of the research results consists in the development of

theoretical and methodological provisions and practical recommendations for the

development of a credit system in agriculture.

Elements of scientific contribution and subject of protection are the following

theoretical and practical results:

6

- the essence and concept of crediting of agricultural enterprises regarding the

features and conditions of its implementation are clarified.

- an organizational and economic assessment of crediting in agriculture was

given, its characteristic tendencies were determined: the growth in the use of credit

allowed to significantly update the fleet of equipment, reduce the need for labor

resources, improve the financial condition of agricultural enterprises, increase their

competitiveness, which in turn increased the ability of agricultural producers to

attract credit. resources for current and investment activities, however, access to

investment loans is limited by insufficient collateral and a high percentage of used

credit.

- a method was developed for determining effective collateral for loans for


- strategic directions for improving lending in agriculture were determined, the

main ones being: the development of the national system of agricultural lending; full

bank capital support; increasing the availability of agricultural credit and increasing

the borrowers' confidence in the system of agribusiness; organization of a rural credit

system;

- the efficiency of introducing a new product was assessed - a thank-you-

farmer debit card for JSC Rosselkhozbank, which will expand and improve the

quality of services provided by the bank, as well as to increase the loan portfolio;

- promising forms and directions of state regulation of activities of agricultural

producers.

The scope and structure of the thesis. The thesis is presented on 79 pages of

computer text, it contains 16 tables, 7 figures, 107 references.

7

1 Theoretical basis for lending to agricultural enterprises 1.1 Essence and the concept of lending to agricultural enterprises In modern conditions of an unstable economy, as well as the sanctions

imposed, the topic of agricultural development is becoming especially important.

A large role in the development and development of agriculture has the

availability of financial opportunities of enterprises, taking into account the

dependence on borrowed investments, the main criterion in the level and speed of

growth in this area is lending to agricultural enterprises.

Crediting is a method of financing the needs of an enterprise on the terms of

payment, urgency and repayment [10, p. 15].

Conducting credit transactions for a bank is the most profitable item of a

business, due to which the main part of net profit is formed, but also the most risky,

since there is a likelihood that a borrower will not repay principal and interest on the

loan acquired.

As an economic category, credit performs the following functions [32, p.67]:

- distribution - between all business entities, depending on the needs. There

may be a distribution by territorial and industry characteristics. Distribution of the

country's loan fund on a returnable basis;

- issue - the loan has an impact on the volume and structure of money supply,

payment transactions, the velocity of circulation of money. Facilitates the creation of

credit means of circulation and the replacement of cash;

- Reproductive - a faster process of updating equipment, technology,

capitalization of profits; production concentration;

- stimulating - credit stimulates the formation of sources of capital for the

expansion of production on a new technical basis;

- control - monitoring the effectiveness of economic entities. Implemented by

monitoring the status of the borrower, adherence to the principles of lending.

In the domestic and foreign literature there are various definitions of credit, the

main of which are presented in table 1 [42, p.89].

8

Table 1 - Definitions of the concept of "credit"

№ The authors Definition 1 Atlas M.S. A loan is a system of monetary relations through which the state

mobilizes temporarily free funds of the economy, budget funds and the population and systematically uses them under conditions of repayment and urgency to ensure expanded reproduction.

2 Avagyan G. L., Bayanduryan G. L., N. Bychkova

A loan can be defined as a subject of a loan agreement, i.e., funds provided by a bank or other credit organization (lender) to a borrower — an individual (consumer credit) or a legal entity — on terms of repayment, payment, or urgency.

3 Buyanova M. O. A loan is cash transferred to a borrower by a bank or other credit institution in the amount and under the conditions stipulated in the relevant agreement.

4 Dodonov V.N., Rumyantseva O. G., Kaminskaya E. V.

A loan is a loan provided in cash on a repayment basis and, as a rule, a payment (in the form of interest on the use of a loan).

5 Lexis V. A loan is a trust that a person who has assumed the obligation of a future payment enjoys on the part of the person entitled to this payment, that is, the trust that the lender gives to the debtor.

6 Lavrushin O. I. A loan is a transfer by a creditor of the loan value to a borrower for use on a repayment basis and in the interests of public needs.

7 Mill J.S. A loan is a permit to one person to use the capital of another person.

So, one defines credit as a relationship, the second - as money, the third - as a

loan or a loan, the fourth - as trust, the fifth interprets credit as an action. Views about

the nature of the loan are quite different and many authors consider its individual

elements in this concept. According to the author, it would be expedient to consider

credit in the aggregate of its components: as, first of all, the movement of

loan capital, in which free money accumulates and, therefore, the system of relations

between the participants of the reproduction process (state, population, commodity

producers, as well as buyers, banks, lenders and borrowers).

The basis of credit conditions are the following principles: urgency, repayment,

payment, security of the loan, the intended use [44, p.120].

The principle of urgency presupposes the presence of a time aspect in credit

relations (there is a certain time interval between the moment of issuing and the

moment of loan repayment, which is fixed in the loan agreement).

9

The principle of repayment means the fact that the loan is granted to the

borrower for a certain period and must be returned to the bank after it expires.

Payable credit. The basis of this principle is the main goal - the extraction of

income. The borrower must pay the right to use the loan. Fee for use is a banking

product. The amount of bank interest depends on the following indicators:

1) Bank of Russia refinancing rates;

2) The state of the interbank market services;

3) Demand and supply for credit resources;

4) The size and term of the loan;

5) The stability of monetary circulation in the country.

The principle of collateral arose as a way to reduce credit risk. It is an

important principle for guaranteeing loan repayment. To ensure the return of loans,

banks require material guarantees from their clients for the return of loans. This

principle is very important for the Russian practice of crediting in modern conditions,

the author's proposals on this principle are reflected in Chapter 3 of the work.

The principle of targeted use derives from the role that credit plays in

economic life. By providing a loan, the bank must be sure that the credit resource will

be used efficiently and returned on time. Accounting for the purpose of the loan

allows you to more accurately calculate the risk and profitability of the loan. You

must understand that the bank can not lend to any customer.

The subjects of credit relations are the lender and the

borrower [64,90 ] . Creditor - special credit organizations, first of all, banks, besides,

guarantors and the state. Borrower - individuals and legal entities: entrepreneurs, the

state, individual citizens. In turn, the object of lending can not be any need of the

borrower, but only that which is associated with its temporary payment difficulties,

caused by the need to develop the production and circulation of the product. Security

should be complete and of high quality, since it is one of the most reliable ways to

reduce the risk of loan default [16, p.98].

10

In world banking practice there is no single classification of bank

loans. However, most often in the economic literature there is a classification of loans

according to the following features [5, p.78]:

1) Purpose:

- industrial;

- agricultural;

- trade;

- investment;

- consumer;

- mortgage.

2) The deadline for granting (on demand and urgent):

- short-term (up to 1 year);

- medium term (from 1 to 3 years);

- long-term (over 3 years).

3) Security (secured and not secured);

4) Methods of repayment (one time, in installments);

5) Kinds of interest rates (fixed, floating);

6) Am size (small, medium and large) [2 , p.184].

Lending is usually carried out on the purchase of inventories and production

costs, which are included in the normalized working capital: goods shipped, payment

of which has not come; issued letters of credit, etc.

For economic purposes, loans can be divided into:

1) Associated (target) - for a specific transaction or to meet a specific needs of

the enterprise:

- payment of payment documents of counterparties;

- purchase of securities;

- advance payments;

- payments to budgets;

- wage;

11

- stockpiling;

- financing of current production costs;

- financing of investment costs, including loans for leasing, etc. operations;

- others [3, p. 348].

2) Unrelated (without specifying a specific goal).

The form of the loan can be divided into non-cash and cash form. Moreover,

cash loans are most often issued to individuals, when applying for loans by legal

entities, it is most often that they use non-cash form of payment, or, provision [30,

p.34]:

- A bank loan can be provided as a single amount, or in the form of a credit line

(simple non-renewable) credit line, revolving (revolving) credit line).

- when concluding an overdraft agreement to a settlement account, a client can

pay bills for goods and services of his counterparties in an amount exceeding

the amount of credit receipts to his account, i.e. On a permanent basis, there is a debit

balance on the account, the amount of which is regulated by the maximum allowable

loan amount under the agreement.

A bank loan does not cover the needs of the enterprise, caused by losses, they

must be covered by its own working capital [61, p.123].

The company has the right to receive a loan in any commercial bank that

provides such a service.

This procedure gives the company the opportunity, focusing on its own

interests, to choose a bank where credit policy is more flexible, operations are

performed faster and clearer, better information, a wider list of services provided,

there is an orientation of credit products to the sphere of activity in which the

company operates.

Lending to enterprises is made on the basis of a loan agreement. The contract

defines the rights and obligations of the borrowing company and the bank, taking into

account the nature of the loan provided and the financial condition of the company,

establishes the parties ’responsibility for breaching the terms of the contract [70,

p. 289] .

12

The loan agreement also defines the following conditions as necessary: lending

objectives, loan amount; terms and basic conditions for issuing and repaying a

loan; ways to secure a loan commitment; interest rates for the loan; a list of

calculations and information necessary for lending, penalties, conditions for resolving

disputes under the contract, conditions for the possibility of prolongation, as well as

the timing of their provision [9, p. 88].

To reduce the risks associated with the non-return of borrowed funds, before

making a decision on granting a loan, the bank analyzes the creditworthiness of the

company.

Under the company's creditworthiness is understood as the presence of the

prerequisites for obtaining a loan (purpose) and its timely return in full [75, p. 43].

The creditworthiness of an enterprise is determined by its credit history, current

financial condition and liquidity of its assets.

Each bank has its own regulations governing the assessment of the

creditworthiness of borrowers.

Creditworthiness of a borrower is divided into three main categories: reliable

(creditworthy), unstable (limitedly creditworthy), unreliable (insolvent).

When a borrower is assigned the category of a reliable loan, it is granted on

general terms with the possibility of preferential conditions [54, p.9].

In the case of assigning a category to an unsustainable bank, the borrower has

the right to introduce additional standards of control over the activities of the

enterprise in order to make a timely decision on repayment in the event of a

deterioration in the financial condition of the borrower, as well as to introduce liquid

collateral for the loan.

It is advisable to consider lending to the enterprise if it is recognized as an

unreliable customer, then the bank can provide a loan under special harsh conditions.

The low efficiency of agricultural enterprises, the availability of receivables

and overdue loans, an excess of commodity and industrial stocks makes agriculture

not interesting for banks as a borrower and lowers its creditworthiness.

13

To monitor the fulfillment of the terms of the loan agreement, the targeted use

of funds received by the company, timely and full return, the bank analyzes the

borrower's business activities, assesses its financial position, checks the primary

accounting documents [77, p. 41].

The loan agreement specifies the sanctions (termination of lending in full or in

part, early debt collection, increase in interest rates, the introduction of fines and

penalties) applicable to the borrower in case of non-compliance with the terms of the

loan:

- the occurrence of unsecured debt;

- inappropriate use of borrowed funds;

- sales, unsatisfactory storage or intentional damage to the collateral;

- evasion from banking control [97, p.48] .

In case of regular payment violation according to the schedule of the loan

agreement, the company deprives itself of the opportunity to receive a new loan. The

bank may issue a loan to such a borrower under a special guarantee to minimize the

risks of irreparability.

If the bank has revealed that it is impossible to repay the loan, the lender may

use security (collateral) on the loan to pay off the debt. When issuing a loan under the

guarantee of another organization, overdue debts are collected in an indisputable

manner from the guarantor’s account. For these purposes, when signing a loan

agreement, a surety agreement, a guarantor, there are mandatory supplementary

agreements to the settlement accounts agreements, both of the main borrower and

sureties opened in any banks, without accepting the amount of the debt [30, p. 328] .

In addition to the sanctions specified in the contract, to the borrower who fails

to fulfill obligations for the timely return of the funds received, the following

measures can be taken:

- the appointment by the creditor bank of the administration for operational

management;

- initiation of proceedings on recognition of the enterprise as insolvent

(bankrupt) in the arbitration court;

14

- reorganization.

Legal regulation of crediting in accordance with the Constitution of the

Russian Federation is referred to the jurisdiction of the Russian Federation (Article

71 of the Constitution of the Russian Federation). The most important legal acts

regulating bank lending are Federal Laws of July 10, 2002 No. 86-FZ “On the

Central Bank of the Russian Federation (Bank of Russia)” and on December 2, 1990

“395-1“ On Banks and Banking Activities ” [28, p. 93] .

A study of theoretical judgments about the nature of the loan, presented in

domestic and foreign literature, made it possible to determine that currently there are

no uniform approaches in disclosing the essence of a loan. It should be noted that in

modern conditions, the loan primarily serves the needs of industries with a high rate

of turnover of working capital, a high level of profitability and low riskiness.

The thesis substantiates the proposition that it is not enough to consider the role

of a loan only in the context of its functions.

Thus, we consider it necessary to investigate the role of credit, as a process:

- ensuring the continuity of capital circulation, which is achieved through the

regular sale of finished goods and implies active commercial lending, the availability

of bank lending to entrepreneurs, the presence of a sufficiently developed consumer

credit. To achieve sustainable continuity of the cycle, it is very important to timely

purchase of raw materials, materials, renewal of fixed capital;

- accelerating the concentration and centralization of capital, which is a

prerequisite for economic growth and stable development, makes it possible to

expand the boundaries of individual accumulation. The use of credit can significantly

reduce the time to expand the scale of production, update products and improve

production efficiency and labor.

In the dissertation, it is proposed to evaluate the role of the loan, taking into

account the activities of credit institutions, their credit policy and the credit system

established in the state [29, p. 52].

15

1.2. Features of agricultural lending The definition of the term "lending to agricultural enterprises" in the literature

is quite rare.

There is the concept of a bank loan as a set of relations by the bank and the

borrower regarding the provision of a certain amount of funds for targeted use based

on timely repayment and receiving a fee for using funds as interest [105, p. 77 ] .

Due to the insufficient development of the essence of the notion “lending to

agricultural enterprises”, its detailed specification is necessary. .

In our opinion, the crediting of agricultural enterprises can be understood as the

provision by banks (credit organizations) of funds to enterprises that store, transport,

supply it to consumers, process agricultural products, and provide agriculture with

machinery, chemicals and fertilizers serving agricultural production for a certain

period. on terms of repayment, urgency, chargeability and material security.

The main distinctive feature of the agrarian sector of the economy is its

seasonality and, as a result, dependence on credit resources [19, p . 186 ] .

But in modern times, there is a reduction in the volume of credit support for

rural producers, due to the growing crisis in the financial system, which is detrimental

to both banks and the agricultural sector [29] .

For banks, lending to agricultural producers is the least attractive for a number

of specific risks:

1) the instability of the financial condition of agricultural enterprises;

2) Strong dependence on external conditions (seasonality, weather conditions,

quality of sown seeds);

3) Lack of a market for agricultural land and the possibility of their mortgage;

4) High risk of loan default;

5) Dependence of the sales market on economic and political changes.

The main factors that reduce the credit activity of agricultural enterprises are:

1) Increased interest rates on loans;

2) Short-term loan period;

16

3) Strict documentation requirements;

4) Mandatory provision of collateral;

5) Long term of approval [8, p.34] .

The specificity of agricultural credit, as compared to other forms, consists in

the following features (Figure 1):

1) Funds are provided both to legal entities (and various organizational and

legal forms), and to individuals acting as producers of agricultural products;

2) Credit is provided for current purposes, investment activities;

3) The need to provide a loan, taking into account a long period of turnover of

funds in production;

4) There are special loan products developed based on the needs of enterprises;

5) The predominance of long-term loans;

6) Lending to agriculture is carried out on preferential terms;

7) Banks engaged in lending to the agricultural industry have a high state share

in the authorized capital - for example, Rosselkhozbank, Sberbank.

8) Compensation for increasing the authorized capital of agricultural banks at

the expense of budget funds.

Figure 1 - The essence and features of agricultural credit

The profitability of agricultural producers is very low, so this area is

uncompetitive in relation to other producers in the market of credit funds. There is

also a weighty problem with collateral, or, more precisely, liquid collateral [53, p.32].

The specifics of agricultural credit

Providing funds to legal entities (in various organizational and legal forms), and individuals

acting as producers of agricultural products

Creditors can be both banks

(specialized and universal), and other credit and financial

institutions

The loan can be provided for

financing both current and investment activities.

Crediting of agriculture is carried out on preferential terms, which requires strict

accounting of budgetary and extrabudgetary

resources spent for this purpose and evaluation of the effectiveness of their

use

17

At the same time, the lack of insurance against the risks of the activities of

enterprises aggravates the results of consideration of loan applications. At one time,

agricultural insurance in Russia was obligatory, the state assumed all risks, i.e. the

debt of agricultural enterprises was written off by the state (Figure 2).

Figure 2 - Features of agricultural production that affect lending

These features determine the value of the effective functioning of the credit

market infrastructure, which provides conditions for the continuous financing of

agricultural production [94].

Features of agriculture, affecting the organization of its lending

Sectoral Intra industry

The duration of the turnover of circulating assets

Continuity of production

Ability to self-reproduction

Dependence on natural and climatic conditions of production

High risk

Use of land as the main means of production

Dependence on industrial enterprises 1 and 3 of the agro-industrial complex

State regulation of agriculture

Differentiation of agricultural enterprises by size

Large Average Small

Differentiation of agricultural enterprises on the legal form

Agricultural organizations in the form of cooperatives, OJSC, CJSC, unitary enterprises,

individual farms, farmers, etc.

Differentiation of agricultural enterprises by specialization

Crop production Livestock

Grain-beet, vegetable, fruit and etc.

Dairy and meat cattle breeding, pig breeding, poultry

farming, etc.

Profitability of agricultural production, resource productivity

Ownership of land, structure of production potential

Credit security The level of creditworthiness of the industry

18

Considering the peculiarities of agricultural production related to seasonality,

riskiness, the duration of the production cycle, as well as the internal consumption of

part of the output, participating in the further technological process, we believe that

insurance related to one of the most complex types of business can contribute to

mitigating risks in the agricultural sector. Here the object is non-existent property,

future harvest. Risks - its shortfall or death due to natural phenomena, for example,

destruction by hail. Therefore, in the world, agricultural insurance is not focused on a

specific insurance event, but on deviations from the average yield level established

for a specific region according to statistical data for 5-15 years. It should be noted

that already at present part of the risks are covered by the agricultural producer

himself [68, p.98].

Of course, the largest chance to get a loan on the most favorable conditions is

provided by enterprises engaged in large-scale production by providing liquid

collateral, as well as repaying the loan obtained by diversifying production activities,

marketing manufactured products while minimizing costs [29].

At the same time, micro and small businesses have advantages over large ones

- high mobility, quick response to market conditions. Active competitiveness,

personal interest in the results of the ability to quickly adapt to changing business

conditions. But this does not help with access to credit resources, since small forms

of management cannot provide collateral suitable for the criteria of security. This

reduces the interest of investors, which is further strengthened by the high costs of

providing a loan for the bank, but credit assistance to this business segment is

necessary to carry out its activities. Therefore, the state provides subsidies to small

forms of economic management of the agro-industrial complex in a large volume [66,

p.9].

Currently, there are five groups of factors that affect the availability of credit.

The first group of factors is related to the adequacy of the normal source of

repayment, which means that the company has reason to expect to receive proceeds

from the sale of products, allowing after the payment of taxes to cover the principal

amount of the debt and interest.

19

The second group of factors covers the conditions that allow the business entity

to remain stable even under the influence of adverse circumstances, and to ensure

obligations in the event of insufficient repayment sources.

The third group of factors includes the borrower's credit history, which refers

to information about how an economic entity in the past paid for its obligations. If

there are facts of non-repayment of debt, cooperation with banks may be suspended

or completely closed.

The fourth group of factors includes the possibility of obtaining concessional

financing, since the policy of the federal and regional authorities has a significant

impact on the availability of credit.

The fifth group of factors includes transaction costs incurred by the economy in

connection with obtaining a loan. For a large organization, these costs per ruble of

funds provided are significantly lower than for small ones [51, p.5].

As noted above, large farms have greater access to credit, mainly due to

savings in transaction costs and lower business risks. However, this conclusion is

valid when the company effectively uses its existing capacity. Quite often, large

enterprises use many assets inefficiently and often small ones turn out to be more

viable and have greater access to financial resources [18, p.2].

Thus, the improvement of lending to agricultural enterprises is still considered

to be a rather difficult economic problem.

The study revealed that interest rate compensation does not guarantee a surge

in funds to agriculture, since the bank’s attractiveness of the sector is quite low for

reasons of high risks and poor economic condition of borrowers.

The state through various tools and methods can affect the efficiency of

enterprises, contribute to the creation of a developed agricultural infrastructure, as

well as reduce the degree of risk through the creation of an insurance system [41,

p.1].

The most appropriate for agriculture would be the introduction of a special

mode of lending with a lower interest rate for agricultural producers, which would

significantly expand the range of producers who receive short-term and investment

20

loans. However, it is possible only with a decrease in the general level of inflation in

the country [92, p. 4].

1.3 Russian and foreign practice of lending to agricultural enterprises Over the past two decades, the importance of state regulation of the agro-

industrial complex has increased. Moreover, the degree of support depends on the

level of favorable conditions for the development of rural production. In countries

such as Japan, South Korea, Norway, the state allocates up to 70% of compensation

from the cost of final products. The same amount of state support depends on the

level of income of the country [22, p. 7].

In the United States, its size is about 1%, in the EU countries - 1.3%, in Japan -

1.4% of the gross domestic product [37]. In Russia in 2015, the state allocated 190

billion rubles to agriculture, which was less than 0.5% of GDP. In 30 billion

rubles. estimated the amount of indirect support for the industry [16].

World practice shows that in order to receive quality products from agricultural

producers and increase their competitiveness in the market, it is necessary to provide

the industry with free, affordable and inexpensive finances. Their presence and

sufficiency determines success in the implementation of the tasks in the field of

agrarian policy, sustainable development of the industry, which is a priority in the

policy of any state [20, p.6].

Bank credit provides such an opportunity to provide affordable finance for the

efficient operation of the agro-industrial sector, therefore, abroad is one of the most

important elements of the economic development of agricultural production.

A special role in agriculture is played by investment (long-term) loans, which

allow maintaining the reproduction process, increasing the volume and scale of

production, improving product quality, optimizing costs, and increasing profitability.

The level of borrowing in the agriculture of developed countries is very high.

21

In the 60-70s the role of credit in providing finance for the agro-industrial

sector is growing, and in some European countries it takes about 50% in agricultural

capital: in England and Germany a little more than 50%, in Belgium and Italy - 34%,

in France - about 42% [31, p. 9].

Credit in agriculture in these countries, cooperative and government

organizations. In second place in the provision of loans to agriculture in Europe are

commercial banks that do not have much interest in such a product due to low

profitability and high risks. But, in England, for example, as an exception to the rules,

a larger volume of loans to agricultural producers is provided by commercial banks,

and the state’s share is only 10-12% of total debt. In France, by contrast, state and

cooperative credit prevails (about 90% in credit debt), a similar situation in Spain [17,

p.2].

The use of credit in agriculture in the countries of Western Europe served as

the basis for the rapid accumulation of agricultural capital and for the industrial

restructuring of agricultural production based on this process. The basis for this is

lower interest rates on loans compared with the profitability of agricultural

production. This becomes possible through state regulation of agricultural crediting

or even through state participation in enterprise lending.

Most of the loans provided are medium and long-term loans, this leads to a

constant increase in the loan debt of agricultural producers. It was believed that such

a situation, when payables were constantly increasing, was considered a negative

factor for the development of all agricultural enterprises, whereas this statement is

true only for small farms.

The US Congress annually allocates multimillion-dollar funds for various

farmer programs and other direct and indirect forms of financing the industry, so that

America’s agriculture can meet if not all existing, then at least most of its financial

needs [6, p. 13].

The number of farms that attract loans is steadily increasing every year. So, at

the end of 2015, the total level of farm business debt amounted to $ 224 billion (3, p.

14). This figure increases annually, which indicates the high popularity of farm loan

22

programs in the United States and, importantly, the confidence of commercial banks

and other lenders in farmers-borrowers.

The main creditor of the farm business in the United States for almost a century

has been the Farm Credit System (FCC), a national financial institution created to

provide reliable sources of credit to farmers for whom conditions and lending rates of

commercial banks were unprofitable [24, p.199].

The FCC provides three types of loans:

- Operational (up to 1 year) - for the current financing of working capital;

- medium-term (1-7 years) - for the purchase of goods for relatively long use

(equipment, livestock);

- long-term (up to 40 years) - secured by real estate for the purchase of land,

the construction of agricultural structures, houses, etc. [13, p.90].

A special place in the US farm lending is occupied by the Farm Service

Agency (AFP) of the US Department of Agriculture. Its activities are aimed at

providing temporary financial support for American farmers and ranchers who are

not able to attract commercial bank loans through the level of interest rates and other

credit conditions [39, p.3 ].

In the US, farmers, in meeting their credit needs, often resort to the use of

credit guarantees. Then the bank issues a loan, and the AFP can guarantee up to 90%

of the loan amount, and in some cases up to 95%. The agency is responsible for

accepting all guaranteed loans, monitors debt payments and checks the activities of

creditors in relation to borrowers. Farmers apply to the bank for a loan, and the bank

to the Agency if the loan does not fall within its standard parameters [33, p.8].

Government support for agriculture has been and continues to be implemented

in many countries with the help of special loan programs, and this tool is especially

common in developing countries, although it is also used in highly developed

countries.

Another important lever for regulating the agrarian economy by the state is

concessional lending. Concessional lending is carried out to ensure optimal

production conditions for farms that are not able to be financed from their own funds

23

or borrowed capital. It should be noted that the availability of subsidized loans

largely depends on the rate of the Central Bank of the Russian Federation, to which

the calculation of this subsidy is tied. Thus, raising the CBR rate by 1% will reduce

the real volume of newly attracted subsidized interest rates, despite its importance,

has gained a dominant role in the structure of state support [52, p.73].

Privileges are often provided as part of targeted programs that reflect

government policy priorities. The fifth part of the long-term and medium-term loans

of the Bank of Germany is financed on concessional terms under the programs

“Young farmers”, “Agriculture”, “Renovation of the village”, and within the

framework of the “State financial support for agricultural enterprises [38, p.6].

The basic principle of concessional lending is a partial compensation of the

current interest rate of funds from the budget. However, the mechanism of its

application in each country varies depending on the conditions of a particular

country. In Austria, the amount of budget compensation and a preferential loan rate

are in direct proportion to the bank interest rate. For France, the discount rate is fixed,

and the bank rate only affects the amount of budgetary compensation. In Germany,

both indicators are stable [90, p.16].

For French farmers, six types of concessional loans are available with different

interest rates - depending on the type of loan and the term from 3.75 to 8.25% per

annum (for young farmers, 2.75-4%), for a period of 7 to 12 years for unfavorable

natural-economic zones and for a period of 5 to 9 years for other areas in the amount

of not more than 300,850 thousand francs. The amount of subsidies from the budget

is the difference between the contractual interest rate and the rate of a soft

loan. According to the results of the competition of banks, contractual rates are

established.

For farmers in Germany who participate in the Investment Promotion Programs

and Agrarian Loans, preferential loans in the form of loans from 1% per annum or a

decrease in the lending rate of existing loans by 4-7% are made [102, p.4].

For farmers in Austria there is no fixed rate for soft loans. Possible

differentiation of loans for two levels of compensation surcharges. Compensation

24

payments range from 50 to 36% of the current interest rate of the lending bank [14,

p.43].

Concessional lending is carried out in all areas of agriculture and thereby

stimulates the development of the most promising and priority sectors. In Austria, up

to 40% of the total amount of a soft loan is used to improve the organizational

structure of farms, about 27% is used for reconstruction. Construction of residential

and commercial buildings, about 12% - for the mechanical equipment of agriculture,

5% - for the sale of products. More than 70% of the total volume of concessional

loans is channeled into modernization and improvement of the economy in

France [57, p.247].

Conditions for granting concessional loans are constantly changing by the state

in accordance with the current economic situation and the needs of farmers. For

young novice farmers introducing innovations, farms and cooperative organizations

apply a more preferential mode of lending.

In times of crisis, American banks, unlike Russian ones, do not stop lending

and do not raise rates. With the support of the government, they act in the opposite

direction, with the understanding [67, p.28]:

- if the farmer can not take a loan because of the high interest rate, then he will

not be able to buy fertilizer, seeds or equipment, and therefore will not receive

the harvest. When building an economy on consumption, with an increase in interest

rates, the economy of the whole country will lose.

Bank managers in the UK prefer to lend only to those farmers who have at

least 50% of the cost of capital.

Within the framework of the mortgage law in Germany, lending cannot exceed

60% of the value of a land plot. Repayment of mortgage loans is carried out in a

period of 5 to 40 years. The term of such kind of crediting in Great Britain ranges

from 20 to 30 years [86, p.192].

Interest is paid and the insurance premium is paid 2 times a year. With timely

payment of payments, the loan can not be early claimed by the lender before the

25

expiration of the contract. It is also prohibited and its early repayment, under the

threat of fines.

Agricultural lending occurs in the United States intensively and in large

volumes. The process of accumulation of fixed capital is also covered by credit, as

well as current production with its seasonal costs, which require a quick recovery of

working capital.

The main method of the price support system in the USA is the delivery of

products by farmers as a pledge to the state (Commodity and Credit Corporation) at

fixed mortgage rates. If market prices turn out to be higher than collateral rates, then

the farmer has the right to buy out his produce from the pledge and sell it on the

market. In the case when the farmer did not use his right of redemption before the

deadline, then the pledged product becomes the property of the Commodity and

Credit Corporation [58, p.34].

As a result, lending is successfully used to solve problems. Having a different,

non-lending content.

In developed foreign countries, farmers are given a wide choice of sources of

credit, depending on the purpose of lending and the financial situation of

agrarians. For this, a developed system of cooperative, commercial banks, insurance

companies, and other specialized organizations exists and functions . Serving the

agrarian sphere.

The study of world experience in agricultural lending has shown that these

principles are the basis of credit policy in a number of countries at the present time.

Taking into account the world experience of agricultural crediting. As well as

the historical experience of the functioning of land banks, the priority in solving the

problem of obtaining an affordable, long-term and sufficient loan by Russian

agricultural producers should be the organization of the cash flow management

process.

In connection with the collapse of the USSR, the system of distribution of

finances from a planned one was transferred to a non-system one. Accordingly,

26

agriculture faced the problem of an acute shortage of funds, primarily for financing

working capital during the seasonal production cycle [40, p.203].

Since agriculture was considered to be a subsidized field of activity, in the

absence of a financial and banking system, great hopes were pinned on state aid.

In Russia, the state policy of lending to the agro-industrial sector was placed in

four main tapas [7, p. 9]:

1) Direct government lending, but rather subsidies. The issuance of such loans

was engaged Agroprombank. At the same time, the duties of the bank included

control over the intended use of funds received by the borrower. Due to the fact that

the interest rate level (the issue was made at the refinancing rate) was regulated by

the state, there was no interest of the Bank in the repayment of funds, despite the fact

that the authorized banks were given the right to accept collateral. Agricultural loans

began to be resold to other sectors of the economy. In 1993, interest rate subsidies

were canceled, but benefits for lending periods remained.

2) In 1995, they introduced a new credit system in the form of a commodity

credit. A striking example of this form is the provision of petroleum companies to

agricultural enterprises of fuel and lubricants for future harvest. Moreover, funds for

lending were allocated from the budget, and interest on loans went to oil

companies. The poor harvest of 1995 did not allow agricultural producers to pay their

debts on time, which led to the need to prolong almost 70 % of loans issued.

3) The new scheme of agricultural crediting at the expense of the federal

budget was introduced in 1997 and is considered to be the third stage in the

development of bank crediting of the agro-industrial complex in

Russia. Agroprombank by that time turned out to be bankrupt and was bought out by

the Stolichny Savings Bank (SSB) commercial bank. Thus was formed the holding

"SBS Agro". At the same time, a fund for concessional lending to the agro-industrial

complex was established. Funds from this fund were provided to agricultural

enterprises under 1/4 of the refinancing rate of the Central Bank, but authorized

creditor banks could additionally take 4% of the margin. Innovation significantly

increased the interest of banks in repayment of the loan, however, loans were also

27

provided at the expense of budget funds. In parallel, in the regions, programs of

concessional lending were launched, the implementation of which led to inequality in

the development of the agro-industrial complex, depending on the region.

4) After the crisis of 1998 and the complete collapse of the old credit system,

period 4 begins. The new program provides for the subsidization of the interest rate

of no more than 2/3 of the refinancing rate effective on the date of the loan. Finally,

lending is carried out at the expense of a commercial bank. In the spring of 2000,

the Agricultural Bank was established , which, along with commercial banks,

financed agriculture. Sberbank, Rosselkhozbank (the only bank operating on non-

market terms), Alfa-Bank were the main banks involved in lending to the agro-

industrial complex .

Russian and foreign practice shows that the finances of agricultural

organizations are distinguished by a certain specificity and require a constant inflow

of borrowed capital. The long production cycle, the seasonality of production and the

related features of the formation of costs and stocks in the agro-industrial complex,

there are no sources for continuous financing. The use of borrowed capital allows you

to significantly expand the volume of economic activities of the organization, to

ensure a more efficient use of own funds, to accelerate the renewal of fixed assets,

etc. In this connection, the attraction and use of borrowed financial resources is the

most important aspect of the organization’s financial activities aimed at achieving

high business outcomes [1.9].

Today, it is difficult for agricultural producers to obtain a loan from

commercial banks, which are aimed at working with such borrowers who are free to

provide a high percentage of credit resources for a short period of time. The market

of credit resources in the agar sector has a monopolistic character on the part of

individual credit organizations, and rural producers show low activity.

The largest share in the credit investments of banks in agriculture are long-term

credit investments. At the same time on agriculture, according to expert

estimates. 38.3% of long-term loans received by organizations of the agro-industrial

complex accounted for the rest, 61.7% - for servicing organizations [4.9]. Received

28

funds are spent on the acquisition of fixed assets. In 2015, the rate of renewal of the

main types of agricultural machinery in agricultural organizations compared to 2014

increased by tractors by almost 2 times, the grain harvester by full-time combines -

by 1.6 times [1, 4].

AIC is the most risky and, as a rule, unprofitable object for investment. The

reasons for this are seasonality, a high level of dependence on external factors, such

as weather conditions, market demand, seed quality for planting, as well as

depreciation of fixed production assets.

The complex’s profitability makes the state to implement programs to support

the development of the agro-industrial sector, which is carried out within the

framework of the State Program for the Development of Agriculture and Regulation

of Agricultural Products, Raw Materials and Food for 2013-2020 in the form of

subsidies from the federal budget to the budgets of the Russian Federation [99, p.16]:

1) Reimbursement of part of the costs of agricultural producers to pay

insurance premium;

2) Reimbursement of part of the interest rate on loans and borrowings;

3) State support of livestock industries;

4) State support of crop production;

5) Providing unrelated support to agricultural producers in the field of crop

production;

6) State support for small businesses;

7) State support of economically significant regional programs;

8) Technical and technological modernization, innovative development;

9) Reimbursement of part of the direct costs incurred for the creation and

modernization of the AIC facilities;

10) FTP “Sustainable development of rural areas for 2014-2017 and for the

period up to 2020”;

11) Federal Target Program “Development of Land Reclamation for

Agricultural Lands of Russia for 2014-2020”.

The objectives of the State program for the period up to 2020 are [76,41]:

29

1) Improving the competitiveness of Russian agricultural products in the

domestic and foreign markets based on the innovative development of the agro-

industrial complex, optimizing its institutional structure. Creating a favorable

environment for the development of entrepreneurship, increasing the investment

attractiveness of the industry;

2) Ensuring the country's food independence in the parameters set by the

Doctrine of Food Security of the Russian Federation;

3) Ensuring the financial stability of commodity producers in the agro-

industrial complex;

4) Reproduction and increase of efficiency of use in agriculture of land and

other natural resources, ecologization of production;

5) Sustainable rural development.

The total amount of funding for the State Program activities in 2013–2020 will

amount to 3,773,379,866.50 thousand rubles from the federal budget rub. Consider in

table 2 funds received from the budget by year.

Table 2 - Amount of funds received from the federal budget for the State Program for

the Development of the AIC in 2014-2018

Year Amount, million rubles 2014 189 229,51 2015 221 257,30 2016 240 069,21 2017 254 148,58 2018 271 121,8

Source: (18)

According to the data presented on the official statistics website [45, p.43], the

economy of agricultural organizations improved , the gross agricultural output and

food production increased, and the social development of rural areas intensified

.Thanks to significant investments and the use of innovative technologies, the rate of

recovery of pork production has significantly increased , and in poultry meat its pre-

reform level has been exceeded.

At the same time, the problems of the economic development of the

agroindustrial complex remain. The global financial and economic crisis that began

30

in 2008, as well as the drought in 2010, grabbed 43 constituent entities of the Russian

Federation, in which more than 60% of the country's acreage is concentrated, had a

negative impact on the investment climate in the agro-industrial complex, the

dynamics of agricultural production [84, p.85].

At the expense of the federal budget and the budgets of the constituent entities

of the Russian Federation. Aimed at supporting certain sub-sectors of agriculture, it is

planned to reduce costs and increase profitability, which will allow to increase

production volumes annually, increase production, displace export products and

create a favorable environment for attracting investors.

AIC can be characterized by a strong dependence on borrowed investments,

therefore, banking support as the main source of financing is of great importance in

the development of agricultural production [96,7].

Consequently, the most popular program of state support is the reimbursement

of the interest rate on loans and borrowings. This program includes the

following prodprogrammes [21, p.5]:

1) Reimbursement of part of the interest rate on investment loans (loans) for

the development of crop production, processing and infrastructure development and

logistics support for crop production markets;


the development of animal husbandry, the processing of its products, the

development of infrastructure and the logistic support of the markets for animal

products;


the construction and recommendation of meat cattle breeding facilities;


the construction and reconstruction of dairy cattle breeding facilities;

5) Reimbursement of part of the interest rate on short-term loans (loans) for the

development of animal husbandry, processing and marketing of animal products;


development of crop production, processing and sale of crop production;

31


development of dairy cattle breeding;


processing of crop and livestock products in the development of wholesale

distribution centers;

9) Reimbursement of part of the interest rate on long-term, medium-term and

short-term loans taken by small forms of business;

10) Reimbursement of part of the interest rate on short-term loans (loans) for

the development of breeding- genetic and breeding- seed centers in the livestock and

crop production sub-sectors.

When lending to agricultural producers, state support is provided to the

borrower directly, the bank does not participate in the process of subsidizing.

The scheme for obtaining a subsidy for reimbursement of costs for servicing a

loan is as follows [46, p.95]:

1) The borrower receives a loan;

2) Spends the funds received for the purposes specified in the loan agreement;

3) Document all production costs;

4) Confirms the intended use of the loan;

5) Submits a package of documents, including also documents that confirm the

targeted expenditure of funds, to local authorities;

6) Pay interest and principal in the bank;

7) It makes the calculation of subsidies, which, together with documents

confirming the fact of payment of the loan, is transferred to receive subsidies;

8) Receives subsidies.

The amount of state assistance depends on the form of ownership of the

borrower (farm or legal entity), the crediting period, and the purpose of borrowing

funds [35, p.2].

The role of lending as a source of capital is strictly limited by a strict legal

framework: regarding the term and procedure for repaying the loan, increasing the

value of the loan as the amount of borrowed funds increases, the principle of

32

increasing risk, in accordance with which the increase in the share of credit funds

used by agrarians causes adverse effects households [49, p.7].

The maturity of the loan is directly dependent on the target orientation of the

loan. Short-term and medium-term loans are carried out in order to finance current

costs and replenish working capital, long-term loans for expansion and renewal of

fixed assets. Most of the debt of farmers is for long-term loans.

A wide choice of ways to repay a loan provides the farmer with a wide choice

of types of loan repayment that are optimal in terms of economic parameters in

accordance with his economic possibilities.

Preferential mode of lending allows you to expand access to credit resources of

agricultural producers [15, p.53].

Defining the role of the state in the system of agricultural crediting, we can

conclude that the majority of both domestic and foreign researchers recognize the

objective need for state participation in it.

With any form of state participation in lending to agricultural producers, they

are aimed at the implementation of state-developed programs for the development of

the agro-industrial complex and have both positive and negative results. The positive

aspects include the provision of agricultural organizations with inexpensive credit

resources (setting the interest rate below the market) when financing fixed and

circulating funds [62, p.9].

Negative is the decrease in the motivation of agricultural enterprises to

efficient production and economic activities (focus on obtaining subsidies) and the

weakening of trends towards innovation and the introduction of new credit products

in the banking sector.

Financial services for agricultural producers are provided by commercial,

cooperative and specialized banks, as well as insurance companies, savings banks and

other credit institutions.

In a number of countries target crediting is widely developed, which is carried

out by means of non-bank crediting.

33

The banking system in the agro-industrial complex of foreign countries is a

complex mechanism. At the same time, the organization of providing financial

resources for enterprises in each country has its own specifics. In the agricultural

sector of Sweden, France, the Netherlands and Israel, financial services are provided

by one or several large specialized banks. The financial system of the agro-industrial

complex in Germany and the USA includes a wide variety of financial

institutions [85, p.1].

General characteristics that can be identified with bank lending to agriculture

in Russia:

- a large proportion of lending to agricultural producers in the framework of

state programs for the development of the agro-industrial complex;

- creditors of agricultural enterprises are banks with state participation in the

authorized capital - JSC “ Rosselkhozbank ”, PJSC “Sberbank of Russia”. One of the

most important areas in the activities of JSC " Rosselkhozbank " is lending to

agricultural producers for current purposes - carrying out seasonal field work,

replenishing working capital, purchasing feed, young for fattening, etc. Since

borrowers do not always have sufficient collateral for loans for seasonal work, loans

are provided for this purpose on the security of future crop production [11, p.24];

- a large proportion of investment (long-term) loans in lending;

- compensation of interest rates on loans to agricultural organizations;

- an increase in the authorized capital of agricultural banks at the expense of

budget funds.

In order to improve lending to agricultural organizations, commercial banks

can offer the following areas:

- development of preferential crediting of agriculture for the seasonal needs of

production;

- creation and support of trust funds of crediting with the issuance of loans to

direct agricultural organizations;

- development of preferential loans secured by property;

- development of credit cooperatives, creation and support of land banks.

34

Support for weaker agricultural producers can be accomplished through the

development and implementation of programs for the financial rehabilitation

of agricultural organizations and the modernization of their production, which will

strengthen the role of the state in regulating and supporting the system of agricultural

organizations [95, p.32].

The main directions in the unification of loans to agricultural producers in the

framework of a single agrarian policy is the multisectoral nature of agriculture; the

same tasks in the field of the agro-industrial complex and the adoption of state

programs in accordance with them; the incompleteness of the formation of an

agricultural crediting system adequate to the modern conditions; functioning of

specialized agricultural banks as a support for the development of agricultural

credit. The modern system of agricultural credit should be formed on the basis of a

combination of different credit products, taking into account the specifics of each

category of agricultural producers - large agricultural production cooperatives,

medium peasant (their farmers) farms and small farms.

Domestic and foreign experience allows us to conclude that the credit system

existing in modern Russia has several drawbacks and is not very effective. In this

regard, taking into account the significant stratification of the rural population, a

significant difference in the indicators of the financial and economic condition of

agricultural enterprises, as well as the decline of agricultural production in many

subjects of the Federation, we in the third chapter of the dissertation propose a

number of measures to improve the credit system for agriculture. Government

subsidies should be made not only at a preferential interest rate, but also on the

organization of preferential credit resources by credit institutions themselves, that is,

to issue a preferential loan to rural borrowers, partially reimbursed from the budget.

35

2 Analysis of the current state of lending to agricultural enterprises in the Krasnoyarsk Territory

2.1 Trends in the development of lending to agricultural enterprises The financial crisis that is observed in the real sector of the economy carries

not only negative, but also positive factors. The current situation will make it possible

to create significant advantages for the Russian agrarian sector of the economy, in

particular, increasing the volume and structure of production; improvement of

indicators of financial and economic activity, while receiving proper state support in

terms of import substitution .

During crises, as is known, the political and economic situation is worsening,

all possible risks, including banking risks, are exacerbated. This is especially evident

when lending to the agricultural sector of the economy. The agrarian policy of the

state should be built on the basis of the fundamental principles of the functioning of

the agro-industrial complex of Russia, taking into account the crisis phenomena (Fig.

3) [103].

Figure 3 - The main trends in the development of agricultural lending in Russia

Problems of development of bank lending to agriculture in Russia

Insufficient amount of the resource base of the banking sector and a high level of credit risks in

agriculture

The remoteness of banks from agricultural producers in the area of their placement

Adverse credit conditions and high interest rates on loans, due to the general economic instability in the

country and the level of inflation

Availability of collateral and lack of repayment source

Increased instability of the financial condition of agricultural enterprises

Ineffective interest rate policy of the Central Bank of the Russian Federation

Insufficient amount of attracted deposit resources

Factors increasing the attractiveness of agricultural loans for bank capital

Production in agriculture has a rather long cycle, it is localized in space, which means it is more convenient for bank control than, for example,

the commercial operations of a retailer

Presentation of stable demand for seasonal loans associated with the sowing and harvesting. This

allows banks to predict the emergence of the need for credit resources and to shape their

financial policies in an existing way.

The business of agricultural producers is inextricably linked with the use of land

resources. This makes credit transactions more sustainable and creates additional guarantees for

repayment of the loan if land is used as collateral.

36

In the course of the study, we identified the following main problems in

agricultural lending:

- instability of the macroeconomic state;

- poorly developed financial and credit mechanism and lending mechanism;

- lack of adequate state support for agriculture, ensuring the normal functioning

of producers on the basis of expanded reproduction;

- unavailability of credit resources due to high interest rates and, as a result,

their deficit, which prevents the maintenance of not only expanded, but also simple

reproduction;

- unprofitability of the majority of agricultural enterprises, which does not

allow them to return the received loans;

- late return of the loan funds provided;

- rise in the cost of production due to inflation;

- an insignificant share of expenditures in the budget structure for agricultural

financing [25, p.4].

In the process of researching the market of bank crediting of agriculture in

Russia, the author identified current trends in its development, and also identified

external and internal factors that influence it.

Opportunities for large-scale development of lending to the agricultural sector

are currently laid down in the State Program for the Development of Agriculture and

Regulation of Agricultural Products, Raw Materials and Food Markets for 2008–2012

and 2013–2020, which provides for the provision of subsidies to reimburse a portion

of the cost of paying interest on credits received by organizations engaged in the

processing of agricultural products in Russian credit institutions [26, p.32].

In the conditions of the financial and economic crisis of agricultural

enterprises, the most serious problem remains the search for investors to form

working capital with them and to make capital investments. In solving this

fundamental task, the most important role should be played by the Agricultural Bank,

which is currently one of the main agents of the state in providing credit support to

the agro-industrial sector. Analyzing the current situation with bank lending, we can

37

say that the credit activity of banks began to increase dramatically, the volume of

bank lending to the real sector increased (Figure 4) [101, p.9].

Figure 4 - The volume of loans in the agricultural sector in 2011-2017

The Ministry of Agriculture of Russia pays special attention to the timely

provision of agricultural producers with short-term loans for seasonal field work. So,

as of 18.06.2019, enterprises and organizations of the agro-industrial complex were

granted credit resources in the amount of 234.65 billion rubles, which is 30.53%

higher than the level of the previous year for the same period. In particular, JSC

"Rosselkhozbank" issued loans in the amount of 167.08 billion rubles, PJSC

"Sberbank of Russia" - 67.57 billion rubles.

In 2018, credit resources amounting to 454.76 billion rubles were provided to

enterprises and organizations of the agro-industrial complex to carry out seasonal

field work. ("Agricultural Bank" - 325.73 billion rubles., PJSC Sberbank - 129.03

billion rubles.) [106].

The total debt of the industry grew by 8.3% over the same period last year.

The low activity of agricultural organizations in obtaining subsidies is due to

insufficient awareness of the population.

With the growth in the volume of loans granted for agricultural purposes, the

number of manufactured products grows, and, as a result, the profitability of the

industry as a whole increases.

38

As of 2018, there are 538 agricultural enterprises in the Krasnoyarsk Territory.

The area of farmland is 4 919 thousand hectares. Issued over 94 billion rubles.

agricultural products [74].

The rate of decline in the production of several types of grain crops is

observed.

The composition of grain and leguminous crops in farms of all categories in

2018 compared with 2017 shows a decrease in the gross harvest of wheat, winter rye,

while the production of buckwheat has increased.

Grain production by crop types in farms of all categories is presented in Table

3.

Table 3 - Grain production by crop types in farms of all categories in Russia for

2016-2018, thousand tons.

Type of crops Value Growth rate, % (2017) 2016 2017 2018

Grain, in that including:

2353,5 1921,7 1890,0 98,35

Winter wheat and spring

1571,4 1261,9 1135,3 89,97

Winter rye 23,8 23,5 23,4 99,6 Spring barley 369,2 328,3 350,2 106,67 Oats 363,8 289,1 341,9 118,26 Buckwheat 2,1 4,0 6,6 165,0 Legumes 20,6 14,3 18,2 127,27

In the structure of grain production in farms of all categories in 2018 compared

with 2017, wheat production decreased by 10.3%, rye by 11.1%, barley production

increased by 6.7%, oats by 18.3%, legumes by 27.3%, and the production of

buckwheat increased by 65%.

Visually, the structure of grain production by types of crops is shown in Figure

5.

39

Figure 5 - Structure of grain production by crop types in Russia for 2018,%

In 2018, the largest weight in grain production is wheat - 65.7%, the smallest

buckwheat - 0.3%.

Table 4 - Production of main types of livestock products in farms of all categories in

the Krasnoyarsk Territory for 2014-2018, thousand tons [95].

2014 2015 2016 2017 2018 Food production agriculture, thousand tons:

cattle and poultry for slaughter (slaughter weight)

50,0 49,3 68,5 79,8 82,1

out of him:

cattle 16,6 14,5 15,8 15,3 15,7 pigs 15,6 24,8 42,6 46,9 49,2 sheep and goats 0,1 0,0 0,0 0,0 0,0 birds 17,4 9,6 9,5 17,2 16,9

of milk 368,3 374,4 366,6 371,5 370,5 eggs, million pieces 672,5 703,1 684,4 688,9 702,8

At the end of December 2018 in the Krasnoyarsk Territory the number of cattle

in farms of all categories was estimated at 15.7 thousand heads, which is 2.6% more

compared to the same period in 2017, the number of pigs is 49.92, which is 4.9%

more compared to 2017, birds –16.9 thousand heads. In comparison with 2017, it is

less by 0.3%.

The structure of production of livestock and poultry for slaughter by type is

wheat, 65.70%

rye, 1.20%

oats, 15%

legumes, 0.70%

buckwheat, 0.30%

spring barley,

17.10%

40

shown in Figure 6.

Figure 6 - Structure of production of livestock and poultry for slaughter by type

in the Krasnoyarsk Territory, 2018,%

In the agricultural organizations in 2018 compared to 2017, milk production

decreased by 0.3%, eggs increased by 2% [47].

Livestock today is a promising direction of development, as in the territory of

the region operating enterprises are not able to meet the population’s demand for

relevant products. Therefore, it would be advisable to expand the market, promoting

the formation of new agricultural enterprises and the development of existing ones

[106].

Many agricultural enterprises - 40% cannot be used effectively due to their

moral and physical obsolescence (Table 4).

Table 4 - Depreciation of fixed assets of enterprises in agriculture and forestry,

manufacturing, wholesale and retail trade in the Krasnoyarsk Territory in 2010-

2018,% [101]

Type of economic activity

Years 2013 2014 2015 2016 2017 2018

All fixed assets 46,9 47,3 46,4 45,9 46,1 46,4

pigs

54%

sheep and goats

-1%

other types of

livestock

2%

bird

12%

cattle

31%

41

Continuation Table 4 - Depreciation of fixed assets of enterprises in agriculture and forestry, manufacturing, wholesale and retail trade in the Krasnoyarsk Territory in 2010-2018,% [101]

-Farming, hunting and forestry

43,2 42,3 41,2 41,0 39,6 41,6

-working production

45,8 45,9 46,5 48,4 48,3 47,0

-wholesale and retail trade

30,9 32,6 33,6 31,8 34 37,3

Thus, the specialization and structure of the agro-industrial complex is divided

into:

- Agriculture;

- food and processing industry.

The specialization of the agricultural organization and K (F) X includes:

-corn

- milk

- products in processed form

-meat

- egg

- potatoes

- vegetables

Recently, there is an urgent issue with the sale of agricultural products in the

Krasnoyarsk Territory. Select a number of factors that in our opinion affect the

efficiency of sales of products:

- instability of supply;

- a large number of small suppliers - large overhead costs of wholesale buyers;

- Products of agricultural producers do not meet the requirements of customers

for packaging, packaging, quality;

- high costs for manufacturers to find ways to market and transport with

relatively low production volumes;

- lack of information about potential buyers.

For the first time in the Krasnoyarsk Territory, the Agroterminal wholesale

42

distribution center was opened at the address: Krasnoyarsk, ul. Yastynskaya 47/5.

The total area of the terminal is 60 thousand square meters. Despite the crisis, grocery

retail continues to demonstrate fairly high results of operations. This is a good

indicator for the growth of this sector of the economy and the accumulation of

products of local farmers.

Despite the positive trend in credit growth and production efficiency, the

following problems associated with the agricultural sector remain in the Krasnoyarsk

Territory:

- The consequences associated with the climatic conditions and geographical

location of the region

- financial, due to the fall in prices for crop products, rising energy prices

- low technical and technological equipment of the industry;

- non-compliance with the technology of keeping cattle, including unbalanced

feeding;

- lack of stable markets for agricultural products and food products.

2.2 Assessment of the activities of PC “Rosselkhozbank” and its role in

lending to agricultural enterprises Joint Stock Company “Russian Agricultural Bank” was founded in 2000 in

accordance with the decree of the President of the Russian Federation No. 75-rp

dated March 15, 2000 [34]. Today it is one of the largest banks in the Russian

Federation, which specializes in the development of the national credit and financial

system of the agro-industrial sector and rural territories of the Russian Federation.

Today Rosselkhozbank is one of the largest banks in the country and is the

leader among lenders of the agro-industrial complex of Russia, with the country's

second largest branch network. The Bank has 73 branches, 1,200 additional offices

and 5 foreign representative offices in the Republic of Armenia, Azerbaijan,

Tajikistan, Belarus and Kazakhstan.

43

The bank’s arsenal includes dozens of credit programs: it actively lends

livestock, crop production, the purchase of agricultural equipment under its

guarantee, and also provides support for the development of small agribusiness for

owners of personal subsidiary and peasant (farmer) farms. There is an active

development of banking products and services intended for individuals, which

include consumer lending, cash loans and credit cards, savings accounts and deposits,

remote service channels.

As of January 1, 2019, the JSC “Rosselkhozbank” occupied rather high

positions in the system of national banks.

As of 01/01/2019, the Bank is in the top 5 of the largest credit institutions of

the Russian Federation, being on [63]:

- 1st place in the successful financing of seasonal work and long-term lending

to the agro-industrial complex;

- 2nd place in the banking system of the Russian Federation in terms of the size

of the banking network;

- 5th place in the banking system of the Russian Federation in terms of assets;

- 5th place in the banking system of the Russian Federation by the size of the

loan portfolio;

- 5th place in the banking system of the Russian Federation in terms of equity.

According to the Russian Financial Reporting Standards (RAS), the net profit

of Rosselkhozbank for 2018 amounted to 2.194 billion rubles, which is 24.2% more

than the previous year, follows from the report of the credit institution.

Interest income of the bank decreased by 5.6% - to 241.4 billion rubles, interest

expenses fell by 7.8% - to 172.409 billion rubles. Net interest income amounted to

68.991 billion rubles, showing an increase of 0.4%.

Commission income of the bank amounted to 24.855 billion rubles, an increase

of 8.9%, commission expenses increased by 26.8% - up to 3.064 billion rubles.

Operating expenses increased by 15.5% - to 118.052 billion rubles.

Consider the diagram of the volume of loans in JSC "Agricultural Bank" by

industry.

44

The diagram shows that the volume of loans to agriculture and forestry

increased in 2018 compared with 2017. In 2018, the Agricultural Bank increases its

loan portfolio by industry: wholesale and retail trade, mining and other activities.

The increase in the loan portfolio of the bank was promoted by both a decrease

in market rates and the implementation of state programs that stimulate lending to

individuals and legal entities, as well as measures aimed at increasing the efficiency

of its activities (Figure 7).

Figure 7 - Structure of the loan portfolio of loans (by industry) for the IFRS on

12/31/2018

JSC "Agricultural Bank" is the leader in lending to the agricultural sector

among the largest banks, both in investment lending and in the short-term.

Agriculture lending accounts for 43, 43% in the structure of the loan portfolio of

loans (by industry).

However, agricultural producers do not have enough money to carry out

current activities, as well as to update fixed assets. Agriculture in Russia has a high

degree of wear technology.

Agriculture

43%

other

8%

trade

2%

building

8%

industry

9%

oil and gas

11%

individuals

19%

45

A significant share of credit investments in the agroindustrial complex in 2018

are loans for livestock (24.1%). Crop takes second place. The third place is occupied

by the food and processing industry. Credits to the enterprises of the food and

processing industry accounted for 17.5%, enterprises serving the agro-industrial

complex - 0.3%.

In 2018, the Agricultural Bank of Russia provided agrarians with 275 billion

rubles on terms of concessional financing at a rate not exceeding 5% per annum. The

figure is 41% higher than the same period last year.

Let us analyze the loan products offered in JSC "Rosselkhozbank".

Table 5 - Loans programs of JSC "Rosselkhozbank"

Main factors A loan secured by purchased equipment / equipment

A loan secured by purchased equipment / equipment

Loan "State Contract"

Goals Acquisition of self-propelled, trailed, mounted agricultural equipment; transport; road-building and municipal engineering; used self-propelled agricultural equipment; equipment of vegetable stores, milk collection points; equipment for repair and maintenance; technology innovation

Acquisition of young farm animals for fattening; Acquisition of land plots from agricultural lands; Construction / reconstruction / modernization of industrial and warehouse buildings, premises, engineering networks, barriers, structures

Providing an application for participation in the competition / auction; Enforcement of the state contract

Interest rate From 12.59% (depends on the term of the loan and the financial position of the borrower) Reduced rate - 5% per annum (subject to approval of the Ministry of agriculture)

From 18.16% (depends on the term of the loan and the financial position of the borrower)

From 15.33% (depends on the loan period and the financial situation of the borrower)

Amount Up to 90% - innovative technology Up to 85% - agricultural equipment and motor transport Wed-in the Russian Federation Up to 80% - agricultural equipment of foreign production, used equipment with a service life of 2-3 years Up to 70% - used equipment with a life of 3-4 years Up to 60% - equipment for the repair and maintenance of equipment

Up to 90% - innovative technology Up to 85% - agricultural equipment and motor transport Wed-in the Russian Federation Up to 80% - agricultural equipment of foreign production, used equipment with a service life of 2-3 years Up to 70% - used equipment with a life of 3-4 years Up to 60% - equipment for the repair and maintenance of equipment

In the amount of 5% of the initial price of the state (municipal) contract, but not more than 3,000,000 rubles. - to ensure the application for participation in the competition; In the amount of 5% of the initial price of the state (municipal) contract, but not more than 3,000,000 rubles. - to ensure the execution of state. contract

Term up to 4 years - for used equipment up to 7 years - for new equipment

under 2 years old - to purchase young stock up to 10 years - for construction

up to 90 calendar days - to secure an application for participation in the competition; up to 12 months - for the execution of the state contract

46

Continuation of Table 5 - Loans programs of JSC "Rosselkhozbank"

the form Single issue Credit line

Single issue Credit line

Single issue

Security Pledge of purchased equipment Additional security - guarantee of shareholders / participants Advance from own funds not less than 10-40% of the cost of equipment

Pledge of property Additional security - guarantee of shareholders / participants

Pledge of property Additional security - guarantee of shareholders / participants

Redemption Individual schedule with seasonality Monthly / quarterly Early repayment Grace period of repayment up to 12 months. (new equipment), up to 6-9 months. (used equipment)

Individual schedule with seasonality Monthly / quarterly Early repayment Grace period of repayment up to 12 months.

At the same time - within 5 days from the date of conclusion of state. contract or from the date of signing the protocol Individual repayment schedule - taking into account the execution of the state contract

The percentage of loans for the programs presented at JSC “Rosselkhozbank”

starts at 12.59%, which is high compared with foreign interest rates for agricultural

lending.

Agricultural Bank provides loans for purposes related to the seasonal work:

- Seasonal Standard Crop;

- Seasonal Standard Livestock;

- Seasonal Recycling;

- Agro-Season;

- Seasonal Optimum;

- Loan for the purchase of grain.

The lending rate is 15.06% per annum, and the discount rate is 5% per annum

(subject to approval by the Ministry of Agriculture).

Terms of crediting: no more than 1 year.

Other products at JSC "Rosselkhozbank":

1) For agricultural activities:

- To conduct seasonal field work;

- For the purchase of feed and the payment of insurance premiums;

- To purchase the purchase of agricultural products for its processing and / or

sale;

- For the purchase of farm animals;

47

- Other.

2) On non-agricultural activities

3) Universal loan products:

- To replenish working capital;

- For investment purposes;

- To purchase equipment / equipment on their security.

4) Other credit products:

- State Contract;

- Personal overdraft;

- Overdraft;

- other.

Currently, the state subsidizes agriculture at 80% of the key rate of the Central

Bank of the Russian Federation.

However, today we see more negative points in its use.

First, the entire subsidy mechanism is tied to the key rate of the Central Bank

of Russia, and not to the actual rate that must be paid to the agricultural organization

for the use of the loan. Secondly, the key rate in Russia itself continues to be quite

high, especially in relation to developed countries (Table 6) [104].

Table 6 - Comparative characteristics of key rates of Central banks of foreign

countries

A country Present value, %

USA <2,50

Great Britain 0,75

Switzerland -0,75

Canada 1,75

Australia 1,25

New Zealand 2,0

The data indicate that the key rates of developed countries are significantly

lower than in Russia (7.50%).

That is, it is a stretch to call such a subsidy mechanism preferential.

In 2019, they reduced the amount of subsidies for concessional lending.

48

In 2017 and 2018, the subsidy was 100% of the key rate of the Bank of Russia.

In 2019 - 90% of the key rate.

Example: If the Agricultural Bank approved a loan at 15% per annum, the

subsidy rate will be calculated as follows:

1) 7,50*0,9=6,75

2) 15-6,75=8,25

Thus, the farmer will be credited at the rate of 8.25 % per annum in the bank.

More and more agricultural organizations are experiencing difficulties with

collateral and guarantees when applying for loans. In this regard, it is necessary to

develop a methodology for effective collateral, which is discussed in Chapter 3 of the

work.

49

3 Prospects for the development of loans to agricultural enterprises 3.1 Improving bank lending to agricultural enterprises Analysis of the development of credit in the agrarian sector of the economy

allowed us to identify its features and specific features, as well as develop strategic

directions for its improvement, which boil down to the following main points:

- development of the national system of agrarian crediting with optimization

and increase of the efficiency of the activities of JSC “Rosselkhozbank”;

- comprehensive support of bank capital;

- the increase in the availability of agricultural credit and increase the

borrowers' confidence in the system of agribusiness;

- organization of the rural credit system (SCS).

I. In our opinion, the time has come to develop the national system of

agricultural crediting. The government should prepare a draft special law “On the

rural credit system”, in which it is necessary to stipulate the main directions of its

development:

- the creation of an agricultural credit system in which the dominant place

would belong to the Agricultural Bank, as well as the state agricultural commodity

and credit corporation, which would issue loans to agricultural enterprises on the

security of a future crop;

- Provision of municipal loans from municipal and local budgets for


- to authorize Rosselkhozbank to issue securities guaranteed by the

Government in order to create the authorized capital of the entire rural credit system;

- the possibility of a gradual redemption of the state share of the capital of the

Agricultural Bank by rural credit cooperatives;

- to entrust the Central Bank of Russia with the obligation to draft a bill on the

resumption of circulation of commodity bills of exchange and refinancing of banks

under the bills of exchange of enterprises.

50

At the present stage of development of economic relations, there is a need to

form new sources of investment, taking into account changes in the political,

economic and financial system of Russia.

The results of an earlier analysis of the attraction and efficiency of the use of

credit resources by agricultural organizations make it possible to determine the main

directions for the further development of lending in the agricultural sector of the

economy [88].

II. Comprehensive banking capital support. Banking capital, as one of the

largest sources of financing agriculture, faces many problems, in particular, low

incomes in comparison with other sectors, as well as a high degree of irrevocability

of credit operations.

The solution to this problem is possible by creating interacting integrated

formations, which would include:

- various unions of credit cooperation;

- State Fund for the Support of Agricultural Credit, implementing the

mechanism of state guarantees;

- commercial banks, the principal feature of which is the direct dependence of

their income on the development of agro-industrial production.

It is necessary to promptly introduce into economic practice, or to stimulate the

development of the following areas:

1) Optimization of subsidizing the refinancing rate for credit operations of

commercial banks. However, it should be noted that it is still very problematic to

receive compensation from the state for the loan issued in the form of interest rate

subsidies.

- AIC is mainly engaged in specialized commercial banks, which form the

appropriate staffing, create a customer base, establish business and business relations

in the industry. Even with the abolition of credit subsidies, these banks will be quite

51

problematic to leave this sector, which contributes to the creation and development of

an agricultural credit system;

- the agricultural producer must remain a significant part of the loan not to the

state, but to a well-defined banking institution, since only a certain part of the interest

rate is subject to subsidies.

Recently, practice has revealed a certain disproportion in agricultural lending,

namely, the amount of attracted short-term and long-term loans are decreasing, while

the volumes of interest rate subsidies from the federal budget are increasing.

However, the funds provided for subsidies are enough, mainly for

reimbursement of interest rates on loans issued, which does not significantly expand

the volume of new lending.

2) Concessional lending to agriculture is not enough for full financial support

of the industry. Lending to the agro-industrial complex is a complex and risky

process. For banks that have not previously credited agriculture, it is difficult to

recognize promising producers, to use specialized, collateral-based lending schemes

that are applicable only to agricultural producers. There are also risks of “fair” non-

repayment of loans when force majeure circumstances arise (crop failure, weather

conditions, etc.).

In this regard, insurance companies and government guarantees for banks play

a big role (the state can share commercial risks with them). Abroad there is a

procedure for preferential crop insurance, when every dollar of insurance premium

paid by a farmer is supplemented by a dollar from the state budget. In Russia, this

practice is not common, and without it there will be no waiting for a massive influx

of credit resources into agriculture and a significant increase in the number of credit

institutions wishing to work in this field.

3) Developed market infrastructure is one of the main conditions for the

development of regional agriculture. A significant role in its development is assigned

to the exchange business, the increase in activity of which is possible with the

transition from transactions in cash to forward and futures. Forward transactions

provide an opportunity to sell goods not yet produced at a price that covers the cost of

52

its production. The buyer independently in advance supplies the production with raw

materials and at the same time saves means for storage of goods. Thus, the interests

of all parties are satisfied.

4) It is necessary to take into account the agricultural risks of loss of income in

the course of production, associated with the occurrence of adverse natural events, as

well as price disparity. All this makes the return of credits and loans, as well as

interest on them problematic. To eliminate negative consequences, adequate

agricultural insurance mechanisms should be developed and implemented.

III. Increased availability and increased borrower confidence in the agricultural

lending system are needed:

- expanding the range of services provided by banks and improving their

quality;

- attraction of free cash assets of the banking system, which are further

transformed in the form of loans and investments into the economy, including the

agricultural sector;

- formation of a healthy competitive environment in the banking system;

- promoting the development of new banking services aimed at stimulating

agricultural production and increasing investment activity;

- attracting to the country the best practices of other countries of the world;

- creation of industries of production, processing and infrastructure based on

the introduction of the most modern technology;

- development of model investment projects corresponding to the economic

potential of each federal district, region, district and region;

- differentiation of credits allocated to agriculture, which can and should be

applied both by region (in accordance with natural and economic features, qualitative

diversity of lands and, as a result, by different cost of production) and by industry.

- provision of microcredits to small business.

As a result, the main areas of credit policy may be the provision of loans for:

- modernization and innovation in agriculture;

- long-term investment crediting of agricultural producers;

53

- lending to small and medium agribusiness, with the involvement of credit

cooperatives in this process;

- investing in the social sphere of the village, creating a decent infrastructure

for rural workers (housing, gasification, etc.).

The analysis made allows us to state that the credit system currently existing in

Russia has many flaws and is not sufficiently effective. In this regard, taking into

account the stratification of the standard of living of the rural population, the

stratification of the financial and economic condition of agricultural enterprises, a

number of measures are proposed to build a rural credit system [82, p.42].

Thus, the rural credit system in combination with the budgetary support of the

village can become the main link in solving the problem of the country's food

security.

The prospects for the functioning of the banking sector in agriculture largely

depend on the positive changes in its economy. The infusion of financial resources of

banks in the basic sectors of agriculture is currently not sufficiently effective, since

the return of the resources spent by them on time is often impossible.

To increase the efficiency of agriculture, the following factors should be taken

into account:

- industry susceptibility to innovation;

- availability of the resource base;

- optimization of sales of the products obtained.

As the main Bank providing loans to organizations engaged in agriculture is

JSC “Agricultural Bank”, in the next paragraph 3.2, optimization and increase of

efficiency of the bank’s activities in the field of lending are proposed.

Recently, there has been a negative trend in a smooth transition from lending to

agricultural enterprises to lending to individuals and legal entities in other industries,

and also has begun to carry out settlement and cash services to customers, thereby

greatly expanding the branch network. By introducing new unspecialized products to

the market, the bank limits agricultural producers in the amount of financial

resources, as a service, in the development and implementation of new programs.

54

There is a risk that when receiving a good return from standard operations with other

sectors of the economy, JSC “Rosselkhozbank” from the specialized agro-industrial

complex will smoothly switch to standard products. The only obstacle to this step is a

100% share of participation in the company's charter to the state.

For the successful development of the country's agro-industrial complex, it is

necessary to create conditions for the development of rural cooperatives. World

experience shows that this is a successful path. Farmers in Finland feel confident not

only in the domestic, but also in the world market precisely because of the fact that

the country has developed rural cooperatives. In India, cooperatives provide 55% of

agricultural exports. Cooperatives in Russia also demonstrate cost-effective work, but

so far there are very few of them.

To optimize the sales market, one should take into account that large

agricultural holdings have sales, marketing and logistics departments, thanks to

which their products have attractive packaging for customers and are distributed

through federal chain stores. As for small farms, the introduction of a rate by a

marketer and a sales manager is most often economically inefficient, and small

companies cannot provide their products to the buyer. Manufacturers lack the

knowledge and competence to participate in government procurement and supply to

chain stores. Therefore, it is necessary to create a project, thanks to which

manufacturers receive the necessary expert advice and production audit free of

charge.

3.2 Calculation of the evaluation of the effectiveness of the proposed

activities

There remains a problem with the provision by the borrower of liquid collateral

and a guarantee that is suitable for all requirements, therefore, products that do not

provide collateral are in demand, which increases the risks of banks, which means. It

causes the growth of reserves, reduces revenue and reduces the liquidity of creditors.

As a way out of the current situation, it is necessary to develop mortgage lending for

55

agricultural producers on the security of agricultural land, as well as to revise the

requirements for collateral for loans, softening and updating them for specific types

of loans. Now, despite the availability of special products for agriculture. Collateral

for them is accepted according to the standards established for general loan

acceptance. This complicates the provision of collateral by borrowers, which reduces

the demand for products that provide collateral [98, p.31].

In this regard, we offer banking institutions to apply the methodology

developed by us to determine reliable collateral for agricultural enterprises (Table 7).

Table 7 - Methodology for determining reliable collateral for agricultural enterprises

loans

Type of security Credit amount Note ≥ 30 % residual value of property

< 30 % residual value of property

The property 3 лл 3 лл Accepted as collateral subject to registration of the mortgage agreement with the registering authority

Transport, equipment 3 лл 3 лл Property, from which no more than 2 years have passed

Previously used transport equipment

2 лл 2 лл Property, since which more than 2 years have passed

Securities 3 лл 3 лл Securities accepted for circulation are accepted.

Farm animals 1 лл 2 лл If animals are recorded on the balance sheet of the enterprise as fixed assets

Inventory items Х 1 лл Accepted in the case of a share of less than 60% in the structure of collateral

Pledge of property rights

Х 1 лл

Guarantees of state bodies

3 лл 3 лл

Guarantees of banking institutions

3 лл 3 лл Rating banking institution is not lower than A ++

The guarantee of the owners of the company and / or final beneficiaries

3 лл 3 лл It is mandatory in the absence of other types of guarantees.

The guarantee of the director and / or chief accountant

Х 2 лл

Third party guarantee Х 1 лл

Classification:

3 points - the highest reliability of the form of security

2 points - average reliability

1 point - low reliability

56

In practice, there are cases when the collateral is not enough to secure a loan

commitment. In this case, the borrower offers several types of collateral. For

example: equipment and the guarantee of third parties. Thus, we propose to apply the

following model for determining a reliable composition for securing a loan (table 8).

Table 8 - Model for Determining Reliable Composition

Reliability of security 3 points 2 points 1 point 3 points Allowed Allowed Allowed 2 points Allowed Allowed Allowed 1 point Allowed Allowed Not allowed

According to the methodology, all the objects of the pledged property must

necessarily be liquid and their implementation period cannot be more than 180

calendar days).

Guarantees and sureties should total 3 points, but the total number of the same

type of surety is not taken into account.

Also, if one loan will take into account several objects of pledge, it should be

borne in mind that a pledged object must have at least 1.5 points. This is a rare case.

Example: LLC "X" requests a loan, the amount of which is less than 30% of

the assets of the company. It offers three types of collateral: real estate (60%),

equipment that was in operation (30%) and inventory items (10%), as well as a

guarantee of the director and chief accountant.

We calculate the sum of points: real estate (3 points) + equipment that was in

operation (2 points) + inventory items (1 point) + guarantee of the director and chief

accountant (2 points) = 8 points. Since the collateral objects are 4, we divide 8 by 4,

we get 2, which is more than 1.5. Thus, the above composition of the collateral can

be considered reliable.

The result of research work on the proposal to expand banking services to

increase the volume of lending to agricultural enterprises is a project to issue a bonus

plastic loyalty card in JSC "Rosselkhozbank" "I thank the farmer."

The introduction of bonus plastic cards will open up new prospects for

financial customer service, expand the client base of the Bank and, accordingly,

expand the possibility of obtaining bank profits through:

57

- receiving commissions charged from card transactions;

- an increase in the number of clients due to the provision of services of the

“Thank Farmer” bonus card;

- raising the quality and speed of service. It will allow you to gain a foothold in

the new territorial markets with minimal costs, etc.

The bonus program is a relatively new kind of loyalty program, according to

which, when making a purchase to a buyer, instead of a discount, bonuses are accrued

(bonus points), which he can spend on getting a discount when making the next

purchase.

The “I thank the farmer” loyalty program was launched with the aim to

encourage bank card holders to use cashless payments when making purchases, and

not to withdraw cash in bank branches and ATMs.

Formed long-term relationship with the client. For the bonus program you need

a customer reward system at each stage in order to constantly maintain his interest.

The program will work in online stores and offline sales points.

A feature of the card is that the card account can only be in rubles, since the

card is focused on operations within Russia.

A classic farmer's debit payment card can be received by a farmer under the

following conditions:

- Card issue is free of charge;

- the cost of annual maintenance - 780 rubles;

- use of the bonus card in specialized stores with farm products.

For example, JSC "Rosselkhozbank" should issue 300 thousand plastic cards,

which will include this program.

Approximately 20% of customers who have a credit card in their hands can

activate this service. For the second year of use, the Bank will also issue 300

thousand cards, for the third - 300 thousand cards, for the fourth - 250 thousand.

Currently, such a product is not provided by any bank in Russia. That is, there

are no competitors. At the initial stage, Rosselkhozbank JSC will occupy the market

of this type of service completely.

58

The “Thank you farmer” bonus plastic card issue includes the costs of issuing

plastic cards, creating a design, salary costs and other personal benefits, equipping

workers, advertising costs, and others.

The Bank already has equipment for issuing cards, that is, it is not necessary to

acquire it.

It is necessary to purchase only materials for production.

Material costs for the production of a single card are presented in Table 9.

So, to calculate the cost of a plastic card with a magnetic stripe and applying

information using an inkjet printer, you should consider the following material costs:

1) plastic - 52 kopecks. (5.15 rubles for a sheet from which 10 cards can be

made);

2) laminate - 2.15 rubles. (2 sheets of 14 rubles each, with which you can

laminate 13 cards);

3) printer cartridges: black - 307.34 rub., Color - 770 rub. Total 1077.34 rubles.

Table 9 - Material costs for the production of one plastic card "Thank the farmer"

Expenditures Amount, rub.

Plastic 0,52

Laminate 2,15

Printer cartridges 0,43 Magnetic stripes 0,94 Label strip 1 Embossing (extrusion) 0,2 Personalization 0,4 UV counterfeit protection 3 Total 8,64

When accounting for a single cartridge resource - 191 A4 pages and the

number of cards on 1 page of this format - 13 pcs. it turns out consumption of 43

kopecks. on one card;

4) magnetic stripe - taking into account the length of 10 cm (with a small

margin) for 1 card and a reel length of 1220 m, the consumption is 28 kopecks. for

LoCo type tape and 47 kopecks. for tape type HiCo.

The total amount of material costs is 8.64 rubles.

To start production, it is necessary to take into account the necessary

equipment for creating maps (table 10).

59

Table 10 - Equipment for the production of plastic cards

Equipment Approximate cost, rub. Computer with graphic program 25 000 Jet printer 15 000 Press laminator plastic cards A4 55 000 Plastic Cutter 65 000 Magnetic Strip Encoder 40 000 Embosser plastic cards manual Russian / English 45 000 Embossed character staining press 25 000 Total 270 000

Considered a set of equipment in this price category allows you to issue for the

eight-hour shift about 2000 ready-made cards.

Since it’s quite difficult to stand at the machine on a daily basis, you also need

to develop a card design, keep accounts and look for customers.

Therefore, it is necessary to hire a small staff that will include the employees of

the department themselves. It is planned to attract the following personnel: manager,

production workers, designer, sales manager, analyst, accountant.

The cost of labor remuneration of employees is presented in table 12.

The sum of expenses for remuneration of employees for the first quarter will be

353,600 rubles.

The main goal of this project is to create a new service “Rosselkhozbank” “I

thank the farmer” to spread it in the market of services.

When a novice farmer plans to create his own farm, he has to think about the

material and financial resources that future business will require. Everything should

be foreseen - from the initial financial investments to the arrangement of premises for

the maintenance of animals, the organization of the farm territory, the procurement of

feed and fertilizers. In addition, the future economy will require mandatory

registration.

This service provides for the accrual of 1.5% of the amount of purchases on

your cards are credited to the bonus account in the form of points. Participation in the

loyalty program can holders of existing payment cards of the following tariff plans:

- Personal;

- Credit card;

- Card "I thank the farmer."

60

Loyalty program “I thank the farmer” is connected as a free additional service

in ATMs and terminals, in the additional offices of the Agricultural Bank.

These points can be used in the shops of the agricultural industry to acquire the

necessary goods, equipment and animals. 1 point = ruble, but the maximum discount

does not exceed 50% of the value of the goods.

Table 11 - Labor costs

Position 2018 2019 2020 2021 1 quarter 2quarter 3 quarter 4 quarter

Superintendent (for expansion), 1 person

36 000 36 000 36 000 36 000 144 000

144 000 144 000

Production workers, 2 people.

54 000 54 000 54 000 54 000 216 000 216 000 216 000

Designer, 1 person. 23 000 - - - - - - Sales Manager, 1 person

69 000 69 000 69 000 69 000 276 000 276 000 276 000

Analyst, 1 person. 60 000 60 000 60 000 60 000 240 000 240 000 240 000 Accountant (for expansion), 1 person.

30 000 30 000 30 000 30 000 120 000 120 000 120 000

PH, rub. 272 000 249 000 249 000 249 000 996 000 996 000 996 000 Deductions for social needs (30%)

81 600 74 7000 74 700 74 400 298 800 298 800 298 800

Total 353 600 323 700 323 700 323 700 1 294 800 1 294 800 1 294 800

An important aspect is advertising a new product.

It is necessary to place advertisements on television, radio, on the Internet, to

issue booklets with a detailed description of the new product. You should also notify

customers using online banking and mobile banking via SMS alerts. Advertising

costs are presented in table 12.

Table 12 - The cost of advertising for the first year

Type of advertising Cost, rub. Television (60 days) 936 000 Radio (1 month) 430 000 Booklets (500 thousand pieces) 615 000 Total 1 981 000

So, the total amount of advertising costs in the first year will be 1 981 000

rubles. But in the future the amount will decrease. This is due to the fact that JSC

Rosselkhozbank will eventually refuse some types of advertising, since the potential

customers of the Bank will be sufficiently notified of the new product introduced).

Table 13 shows the calculation of depreciation. Also in the table is calculated

maintenance in the amount of 1% of the cost of equipment per year.

61

Table 13 - Calculation of depreciation, rubles.

Indicators 2019 2020 2021 2022 1 quarter 2 quarter 3 quarter 4 quarter

Depreciation 18 900 18 900 18 900 18 900 75 600 75 600 75 600 Deductions to the repair fund, 1%

189 189 189 189

Next, we present a general table of the total cost of a plastic card.

Thus, the average cost per plastic card for 1 year was 13 rubles. In subsequent

years, the cost varies from the number of cards produced per year.

Take, for example, the following situation in the calculation. The number of

farms reached 36,800 organizations.

Table 14 - Total cost of a plastic card, rubles

Assume that the number of customers who want to use this service will be

15%, namely 5 520 people. After the first year of the program, we will receive an

income of 4,305,000 rubles.

It should be noted that if the program is very attractive and profitable both for

clients and for the Bank, the service can be realized in the future and increase in

volume.

Table 15 - Report on financial results for the years 2019-2022

An important standard is the rate of discount, which is used for discounting.

This standard reflects the minimum amount of income when investing capital.

Indicators Year 2019 2020 2021 2022

Material costs 2 592 000 2 592 000 2 592 000 2 160 000

Depreciation 75 600 75 600 75 600 75 600 Salary 1 324 700 1 294 800 1 294 800 1 294 800 Total cost 3 992 300 3 962 400 3 962 400 3 962 400

Cost per card 13,3 13,2 13,2 14,1


Revenue 4 305 000 4 305 000 4 305 000 4 305 000

Total cost 3 992 300 3 962 400 3 962 400 3 530 400

Profit before tax 312 700 342 600 342 600 774 600

20% tax 13 530 70 260 70 260 70 260

Net profit 54 120 281 040 281 040 281 040

62

The discount rate can be determined taking into account the bank profitability

of 25%. In the table 16 below, the discount rate for each year for a certain period is

determined, as well as the yield and payments during the program implementation.

After analyzing the data, we can conclude that this service will bring profit

only in the fourth year. But 2022 was also taken into account in order to track the net

present value of the analyzed project.

Table 16 - Analysis of cash flows for the years 2019-2022 during the implementation

of the program, rub.

After the first year of implementation of this program, the subsequent costs

will be halved due to the fact that we have already paid for the equipment and card

production, as well as the costs for advertising and design services.

The inevitability of the occurrence of risk situations and the manifestation of

their consequences requires the development and adoption in practice of appropriate

methods of preventing and responding to them in order to eliminate or reduce

damage.

This project is subject to the following risks:

- No demand for plastic cards, "Thank you farmer." This risk may arise if the

new product does not interest potential customers of the Bank.

- Insufficient demand. The risk is due to the fact that actual demand will not

reach the planned value. In this regard, the Bank will issue fewer plastic cards than is

necessary for profit.

In case of occurrence of these risks, it is necessary to increase the expenses on

advertising, as well as introduce any special offers on the acquisition of this card. For


Tributaries 4 305 000 4 305 000 4 305 000 4 305 000

Outflows -918 000 3 916 700 3 886 800 3 886 800 3 454 800 Net cash flow -918 000 388 300 418 200 418 200 850 200 Discount coefficient 0,8 0,64 0,51 0,41

Net present value 310 640 267 648 213 282 348 582

NPV -607 360 -339 712 -126 430 222 152

63

example, free annual service for the first year for regular customers with a good

credit history.

- The risk of non-payment of debt. It follows from two previous risks. It

consists in the fact that, when receiving insufficient profits, JSC “Rosselkhozbank”

will not be able to fully and timely meet its obligations to the Bank of Russia.

Thus, the proposed measures will improve the state of crediting of agricultural

enterprises and help eliminate the identified problems at the beginning of the research

work. It should be noted that the acute shortage of financing in agriculture requires

constant state regulation of the credit system.

64

CONCLUSION

In the course of studying the essence and concept of lending to agricultural

enterprises, it was revealed that a loan is defined as a relationship, as money, as a

loan or a loan, as trust, as an action. Views about the nature of the loan are quite

different and many authors consider its individual elements in this concept. In the

course of the study, we proposed to consider the loan in the aggregate of its

components: as, first of all, the movement of loan capital, in which free money

accumulates and, therefore, the system of relations of participants in the production

process (state, population, producers, as well as buyers, banks, lenders and

borrowers).

The thesis substantiates the proposition that it is not enough to consider the role

of a loan only in the context of its functions.

Thus, we consider it necessary to investigate the role of credit, as a process:

- ensuring the continuity of capital circulation, which is achieved through the

regular sale of finished goods and implies active commercial lending, the availability

of bank lending to entrepreneurs, the presence of a sufficiently developed consumer

credit. To achieve sustainable continuity of the cycle, it is very important to timely

purchase of raw materials, materials, renewal of fixed capital;

- accelerating the concentration and centralization of capital, which is a

prerequisite for economic growth and stable development, allows us to expand the

boundaries of individual accumulation. The use of credit can significantly reduce the

time to expand the scale of production, update products and improve production

efficiency and labor.

In the dissertation, it is proposed to assess the role of credit, taking into account

the activities of credit institutions, their credit policy and the credit system established

in the state [29].

It should be recognized that agricultural credit is a special form of credit

relations in the economy, characterized by the provision of funds to various

65

categories of agricultural producers by banks and non-bank institutions for fixed and

circulating capital in combination with government assistance and regulation.

The specificity of an agricultural loan, as compared with other forms of credit,

is: firstly, to provide money to both legal entities and individuals acting as producers

of agricultural products; secondly, creditors can be both banks and other credit and

financial institutions; thirdly, the loan can be provided for current purposes, as well as

investment purposes; fourthly, crediting of agriculture is carried out mainly on

preferential terms as compared with other sectors of the economy, which requires

strict accounting and control over the budget and extra budgetary resources spent for

these purposes.

Practically in all developed countries the specialized system of agricultural

credit operates. In the process of research, the theoretical and methodological

foundations of the industry specifics, which determine the features of its lending

mechanism, were developed and supplemented.

At the present stage, the development of a bank loan in Russia is not highly

dynamic, which does not ensure the acceleration of the development of the national

economy and does not contribute to the development of mutually beneficial relations

between banks and the real sector of the economy. In this regard, the state needs to

create favorable conditions for the development of agriculture, banks - conditions for

obtaining long-term and short-term bank loans acceptable to borrowers, as well as

ensuring a favorable investment climate in agriculture. In the process of researching

the market of bank crediting of agriculture in the Russian Federation, the author

established the current trends in its development, and also identified external and

internal factors that influence it.

Thus, the main directions for the further development of bank credit in

agriculture should be:

1) government support and stimulation of banking activities to issue long-term

bank loans;

2) the creation of favorable conditions for the revitalization of the business

activity of agricultural enterprises;

66

3) improving the methodology for assessing the creditworthiness of the

borrower;

4) improving the credit policy of banks, taking into account the quality of the

structure of the loan portfolio;

5) increasing the interest of the banking sector in the placement of its assets in

the country's agriculture.

The implementation of these areas in practice will contribute to the activation

of credit institutions in the provision of loans to agricultural enterprises.

In the process of in-depth analysis on the example of the Krasnoyarsk Territory

for four years made groupings of the loan and the availability of payables at the end

of the year for agricultural enterprises. Produced groupings show the impact of

obtaining a loan and the presence of accounts payable and other indicators.

In accordance with the State Program for the Development of Agriculture and

Regulation of Agricultural Products, Raw Materials and Food Markets for 2008-

2012. and 2013–2020, increasing the availability of credit to agricultural producers

was ensured by the provision of subsidies.

Currently, the state subsidizes agriculture at 90% of the key rate of the Central

Bank of the Russian Federation.

However, today we see more negative points in its use.

First, the entire subsidy mechanism is tied to the key rate of the Central Bank

of Russia, and not to the actual rate that must be paid to the agricultural organization

for the use of the loan. Secondly, the key rate in Russia itself continues to be quite

high, especially in relation to developed countries.

Analyzing the current situation with bank lending, we can say that the credit

activity of banks began to increase sharply. So, as of 18.016.2019, enterprises and

organizations of the agro-industrial complex were given credit resources in the

amount of 234.65 billion rubles, including the Agricultural Bank - 167.08 billion

rubles, Sberbank of Russia - 67.57 billion rubles. in the amount of 167.08 billion

rubles., PJSC "Sberbank of Russia" - 67.57 billion rubles. In the dissertation, it is

indicated that the loan debt increased in 2018 compared with 2017 by 8.3%.

67

As part of the state regulation of the credit system in agriculture, the

government should prepare a draft special law “On the rural credit system”, in which

it is necessary to stipulate the main directions of its development:

- the creation of an agricultural credit system in which the dominant place

would belong to the Agricultural Bank, as well as the state agricultural commodity

and credit corporation, which would issue loans to agricultural enterprises on the

security of a future crop;

- Provision of municipal loans from municipal and local budgets for


- to authorize Rosselkhozbank to issue securities guaranteed by the

Government in order to create the authorized capital of the entire rural credit system;

- the possibility of a gradual redemption of the state share of the capital of the

Agricultural Bank by rural credit cooperatives;

- to entrust the Central Bank of Russia with the obligation to draft a bill on the

resumption of circulation of commodity bills of exchange and refinancing of banks

under the bills of exchange of enterprises.

In the course of the study, it was revealed that at present the mechanism of

bank lending is insufficiently developed in terms of providing the borrower with

liquid collateral and a suitable surety, which negatively affects the quality of the

banks' loan portfolio. Therefore, the thesis proposed a method for determining

reliable collateral for loans to agricultural enterprises.

The result of research work on the proposal to expand banking services to

increase the volume of lending to agricultural enterprises is a project to issue a bonus

plastic loyalty card in JSC "Rosselkhozbank" "I thank the farmer."

The introduction of bonus plastic cards will open up new prospects for

financial customer service, expand the client base of the Bank and, accordingly,

expand the possibility of obtaining bank profits through:

- receiving commissions charged from card transactions;

- an increase in the number of clients due to the provision of services of the

“Thank Farmer” bonus card;

68

- raising the quality and speed of service. It will allow you to gain a foothold in

the new territorial markets with minimal costs, etc.

The practical implementation of these proposals will improve the efficiency of

lending to agricultural enterprises.

69

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